This is Why National Fuel Gas (NFG) is a Great Dividend Stock
Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.
While cash flow can come from bond interest or interest from other types of investments, income investors hone in on dividends. A dividend is that coveted distribution of a company's earnings paid out to shareholders, and investors often view it by its dividend yield, a metric that measures the dividend as a percent of the current stock price. Many academic studies show that dividends make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
National Fuel Gas in Focus
National Fuel Gas (NFG) is headquartered in Williamsville, and is in the Utilities sector. The stock has seen a price change of -6.85% since the start of the year. The energy company is currently shelling out a dividend of $0.46 per share, with a dividend yield of 3.06%. This compares to the Utility - Gas Distribution industry's yield of 3% and the S&P 500's yield of 1.38%.
Looking at dividend growth, the company's current annualized dividend of $1.82 is up 1.1% from last year. In the past five-year period, National Fuel Gas has increased its dividend 5 times on a year-over-year basis for an average annual increase of 2.36%. Looking ahead, future dividend growth will be dependent on earnings growth and payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. National Fuel Gas's current payout ratio is 43%, meaning it paid out 43% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for NFG for this fiscal year. The Zacks Consensus Estimate for 2022 is $5.34 per share, which represents a year-over-year growth rate of 24.48%.
Bottom Line
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. However, not all companies offer a quarterly payout.
High-growth firms or tech start-ups, for example, rarely provide their shareholders a dividend, while larger, more established companies that have more secure profits are often seen as the best dividend options. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, NFG is a compelling investment opportunity. Not only is it a strong dividend play, but the stock currently sits at a Zacks Rank of 3 (Hold).
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